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Author: harbor991 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 120800  
Subject: Tax liability for JTWROS Date: 10/2/2012 2:16 AM
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Hello all,

My mother passed away recently leaving behind me and two brothers as the surviving owners of her former residence that was deeded Joint Tenancy with Rights of Survivorship (JTWROS). Although we three now own the house, one of the brothers who is partially disabled lives in it in exchange for paying the property taxes, keeping it insured, and performing day-to-day maintenance. He also pays his own living expenses related to his occupancy such as utilities, phone, etc. I and the other brother receive no financial payments or considerations from this arrangement, nor do we incur any expenses.

In her Will our mother also left us $15,000 to be held jointly by the three of us in any investment vehicle of our choosing, but with expenditures restricted to repair/replacement of major mechanicals such as furnace, AC, roof, water heater, etc. Since the house was fully updated recently, the need to draw from these funds in the next few years is remote. Consequently, we have decided to open a standard, jointly owned brokerage account titled JTWROS. Some of these funds will draw interest or be invested in stocks that will generate dividends and/or capital gains in the future.

My question deals with the tax reporting of any future interest, capital gains and/or dividends. I know the broker will only issue one 1099 and link it to the social security number of that one of us receiving the form. From the prospective of joint ownership, how do the three of us handle this? Does that one individual report for tax purposes and we all then informally work out the money differences? Or do all three of us have to report our portion of the interest/capital gains/dividends? The amounts will probably be small, so our hope is that just one of us can report and pay the taxes and work out any differences with the others. Our fears are that if the tax reporting requirements become too complex or spread out for this relatively small sum of money, we may be better off just buying an old mattress to stuff the money into.

Thanks for any help,

harbor991
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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 116723 of 120800
Subject: Re: Tax liability for JTWROS Date: 10/2/2012 2:27 AM
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My condolences on the loss of your mother. You asked

I know the broker will only issue one 1099 and link it to the social security number of that one of us receiving the form. From the prospective of joint ownership, how do the three of us handle this?

The sibling receiving the 1099 is the "nominee" of the others and issues 1099(s) to them for their shares. See the instructions for Schedules B and D and the 1099 series for the specifics.

Once the nominee figures out what to do it really takes little time to do it.

Phil
Rule Your Retirement Home Fool

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 116724 of 120800
Subject: Re: Tax liability for JTWROS Date: 10/2/2012 12:26 PM
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Phil is right on the money, as usual.

I do wonder, though, if your disabled brother might have a much smaller income than you and your other brother. If so, AND if it was his SSN that was on the brokerage account, he would be the one responsible for preparing the nominee 1099s.

And if he failed to do that, he'd have to pay tax on all of the income. And since he failed to prepare the nominee 1099s, you and your brother would have no idea what to report on your tax returns. And neither would the IRS.

Just sayin'. ;-)

--Peter

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Author: harbor991 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 116730 of 120800
Subject: Re: Tax liability for JTWROS Date: 10/3/2012 3:20 AM
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Hello Phil,

First, I appreciate your offer of condolences. She had all boys (5) but it was the honor of a life-time for us all to work together acting as personal care givers 24 per day, thus allowing her to stay home.

Regarding the issues of "Nominee" responsibilities and the related 1096 Transmittal and 1099 B's, DIV'S, and INT's, I have begun to track down the information and believe I am on the right path. I downloaded the Schedule B and D instructions, the publication "2012 General Instructions For Certain Information Returns", and the various 1099 forms with their related instructions. When I finish researching, I hope I can summarize my understanding of the requirements and re-post for your comments/corrections.

As always, thanks for your help,

harbor991

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Author: harbor991 One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 116731 of 120800
Subject: Re: Tax liability for JTWROS Date: 10/3/2012 3:43 AM
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Hello Peter,

I am suspecting that in addition to your skills at tax preparation that you also possess psychic abilities! For example, you are indeed correct that my disabled brother has much smaller income than both me and his other brother. And amazingly, it is a fact that his SSN is on file with the broker thus making him the "nominee". And Peter, because of both his failing memory and touch of irresponsibility, he's been known to forget important things, often resulting in his taking on more burden than necessary.

I will make him aware of your comments and see if around next April 15 he still "remembers" it. ;-)

Thanks for your help,

harbor991

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Author: Wradical Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 116732 of 120800
Subject: Re: Tax liability for JTWROS Date: 10/3/2012 10:15 AM
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(harbor991:) Hello Peter,
I am suspecting that in addition to your skills at tax preparation that you also possess psychic abilities! For example, you are indeed correct that my disabled brother has much smaller income than both me and his other brother. And amazingly, it is a fact that his SSN is on file with the broker thus making him the "nominee". And Peter, because of both his failing memory and touch of irresponsibility, he's been known to forget important things, often resulting in his taking on more burden than necessary

=============================
Psychic? Hmmm... I've been inclined to credit Peter's expertise to professional education and experience, tempered by common sense. But maybe....

Bill

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Author: ptheland Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 116733 of 120800
Subject: Re: Tax liability for JTWROS Date: 10/3/2012 12:14 PM
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Psychic? Hmmm...

Perhaps more psychotic than psychic. It's a very fine line between the two.

And sometimes it's just a good guess.

--Peter

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